Federal Budget 2024 Highlights

On April 16, 2024, Chrystia Freeland, the Minister of Finance and Deputy Prime Minister, presented her 2024 budget, which projected yet another, whopping, $40 billion deficit. The spin doctors in this Federal Liberal Government’s marketing team have come up with some catchy words to help us digest another year of economic devastation: “to build more homes, faster, help make life cost less, and grow the economy in a way that helps every generation get ahead”.

This blog will summarize the various tax announcements that we believe may be relevant to our clients from the 2024 federal budget. As of the time of writing this, budget bill C-69 has been through first reading and, most notably, excludes any legislation or details regarding what is possibly one of the biggest changes in Canada’s tax legislation in over 20 years, the capital gains inclusion rate increase.

Personal tax changes

Capital gains inclusion rate increase

The capital gains inclusion rate is increasing from 50% to 67% for individuals who earn capital gains in excess of $250,000 per year (and any capital gain earned in a corporation). The change is set to take effect on June 25, 2024. Read our detailed blog on the topic here.

Lifetime Capital Gains Exemption (LCGE) increase

The LCGE is set to increase from $1,016,836 (before June 25, 2024) to $1,250,000 on June 25, 2025. Read our detailed blog on the topic here.

Canadian Entrepreneur’s Incentive

A new, highly limited, exemption will be available for Canadian entrepreneurs to reduce their capital gain inclusion rate on the sale of qualified businesses from 2/3 to 1/3, with a lifetime limit of up to $2 million. The changes take effect on January 1, 2025. Read our detailed blog on the topic here.

Alternative Minimum Tax (AMT)

The alternative minimum tax is a parallel calculation that runs beside an individual’s regular federal tax calculation. It is meant to tax people who have a high level of income with what the AMT deems to be a low level of tax. The government proposed significant changes to the AMT in 2023 and, as with many of the government’s announcements and tax law changes, their legislation caused a lot of unintended collateral damage, most notably to the charitable sector, and low income seniors.

The proposed 2024 changes to the AMT are, presumably, an effort to reduce the impact of these unintended consequences. The AMT will:

• Claim 80% (previously proposed 50%) of the Charity Tax Credit.
• Allow a 100% deduction for the Guaranteed Income Supplement, social assistance and WCB payments.
• Allow certain denied credits to be eligible for AMT carry-forward.
• Full exempt Employee Ownership Trusts.
• Claim 100% deduction for federal logging tax credits.

Home Buyer’s Plan

• Defer the start of the 15-year repayment period, temporarily, for withdrawals between January 1, 2022, and December 31, 2025.
• Increase the RRSP withdraw limit from $35,000 to $60,000.

Disability Supports Deduction

Expands the list of eligible for expending under the Disability Supports Deduction starting in 2024.

Mineral Exploration Tax Credit (METC)

A one-year extension of the METC, for flow-through share agreements in place up to March 31, 2025.

Corporate tax changes

Capital gains inclusion rate increase

The capital gains inclusion rate is increasing from 50% to 67% for corporations who earn capital gains with no $250,000 exemption as with individuals. The change is set to take effect on June 25, 2024. Read our detailed blog on the topic here.

Canada Carbon Rebate for small businesses

After waiting several long-years for their rebates, it appears as if Canadian small businesses will finally get some of their carbon tax back. The refundable tax credit will be available to CCPCs that file their 2023 tax returns on or before July 15, 2024 (the regular filing deadline for December 31, 2023 yearends is June 30, 2024).

Accelerated Capital Cost Allowance (CCA)

Purpose-built rental housing

Regularly 4%, the budget proposes an accelerated rate of 10% for eligible purpose-build rental projects that begin construction between budget date, April 16, 2024, and before January 1, 2031, and move-in ready before January 1, 2036.

Productivity-enhancing assets

The budget proposes immediate expensing for property additions on or after budget date, April 16, 2024, and before January 1, 2027, and available for use before 2028 to the following three CCA classes:

1. Class 44 – patents and right to use patented information,
2. Class 46 – data infrastructure equipment and related system software,
3. Class 50 – general-purpose data processing equipment and software (think computers and servers)

Interest deductibility limits for purpose-built rental housing

The Excessive Interest and Financing Expense Limitation (EIFEL) rules will be expanded to include an elective exemption for certain interest and financing expenses incurred before January 1, 2036 relating to arm’s length financing used to develop or buy eligible purpose-built rental properties in Canada.

Non-compliance with information requests

There are new rules coming which will give the CRA more information gathering power under the income tax act, including standard non-compliances notices issued by the CRA, compliance orders, stopping the reassessment clock and various other measures.

Crypto-asset reporting framework and the common reporting standard

Starting in 2026, the government intends to implement the new CARF in Canada, and impose a new annual reporting requirement for entities and individuals (crypto-asset service providers) resident in, or carry on business in, Canada. This applies to crypto-asset service providers that provide exchange transactions in crypto-assets.

Clean Energy Investment Tax Credit (CIETC)

The 2023 budget announced the intention for the government to introduce a CEITC. Budget 2024 includes mechanics and implementation details about the CEITC which amounts to 15% of the capital cost of each eligible property acquired and available for use between the budget announcement date April 16, 2024, and 2035.

Now that the 2024 federal and provincial budget season has concluded, there’s a lot to unpack and address a host of issues from numerous new taxes, tax base expansions, and other surprises in both federal and provincial indirect taxes such as PST and GST/HST.  To see how your business might be affected by key indirect tax highlights such as British Columbia’s introduction of a “home flipping” tax and PST on digital products and services, please check out our article here.

Would you like to discuss how the 2024 federal budget impacts you?